CITY FOCUS: No hen party for suffering UK poultry firms as producers struggle to make ends meet

It is Britain’s most popular meat yet 45 per cent of all poultry is imported. Chickens and their other feathered friends account for 49.3 per cent of all meat consumed in the UK but producers are struggling to make ends meet.

Privately-owned Dutch firm Vion gave up the ghost yesterday selling its UK poultry and red meat to 2 Sisters, the food group owned by Ranjit Boparan, also known as the chicken king of Birmingham.

His Boparan Holdings has been spreading its wings. It took Northern Foods private a couple of years ago and also owns the Buxted chicken brand. In November Vion’s Dutch parent announced plans to exit its UK operations in the wake of challenging trading conditions and the loss of a number of major contracts.

Poultry: Producers have been squeezed by supermarket customers demanding cheaper birds and the cost of feed increasing.

Ranjit Singh, chief executive of 2 Sisters, said: ‘They have faced significant uncertainty and tough trading in recent months, but today’s acquisition secures a viable future. This acquisition will safeguard a key supply chain for high quality British poultry and meat, offering reassurance to farmers in England, Scotland and Wales and upholding quality and provenance.’

The Vion business is not small – with annual sales almost reaching £2billion last year it has 11 processing sites and around 6,000 employees but made a loss of £40million. It controlled 17 per cent of the market.

At the time it warned enormous investment would be needed to maintain competitiveness against similar plants on the continent. It’s just such competition from abroad, and questionable practices, that sparked the horse meat crisis, thrusting how food makes it from the farm to the fork into the spotlight.

Tesco has now pledged to source all its chicken from UK farms. Around 92 per cent of all fresh chicken meat is produced in the UK but only half in ready meals originates here. Production facilities will need to be doubled to meet demand, and this will take time. We are also forced to import chicken meat because there is something called a ‘carcass imbalance’ – basically we produce enough birds over here but not enough white meat. So we import breast and export brown meat.

Facts: Around 92 per cent of all fresh chicken meat is produced in the UK but only half in ready meals originates here

The value of the business at the farm gate is £2.25billion and at retailer level is £4.5billion.

So why are producers struggling to make a fist of the business given such strong demand?

It is best to take a step back to chart how a bird makes it onto the dinner table.

All eggs laid are delivered to the hatchery where they are incubated. After 18 days the racks of incubated eggs are taken out and candled to remove infertile eggs and damaged embryos. Candling involves shining a light through the egg from behind.

The perfect eggs start to hatch out of their shells on about the 20th day. Day-old chicks are sorted by sex – the tips of the wing feathers show if the bird is female or male. The day-old chicks, also known as poults, are then transported to chicken rearing farms.

Chickens are reared in large purpose-built warehouses. Chickens reared for meat are not kept in battery cages. Chickens are reared from a day old until their weight reaches around 2kg in about 40 days

When the birds reach their required market weight, they are moved from the farms to the processing plant.

Unlike other livestock, poultry is reared on farms which are either owned by or under contract to a particular processing plant.

The processors who supply the supermarkets own, or have a direct contract with, the farms and those companies also often have a hatchery and growing farms as well.

Such vertical integration has been prompted by the Common Agricultural Policy which distorts market conditions.

Chicken producers have not had the benefit of subsidies so they have been forced to find efficient models such as owning the supply chain. The shorter supply chain means there is traceability. On arrival at the processing plant, the birds are inspected under the supervision of an independent vet and then killed. Currently 90 per cent of chickens are produced by six firms, whereas 30-40 years ago there would have been ten times the number of companies.

But despite such scale, producers have been squeezed by supermarket customers demanding cheaper birds and the cost of feed increasing.

Richard Griffiths, an executive at the British Poultry Council, says: ‘The poultry industry has evolved on a purely commercial basis while other sectors have received subsidy benefits. They are competing with foreign firms that have different costs in terms of labour, feed and energy. It’s incredibly variable.

‘Even for high volume producers there is a relatively small margin which creates a huge stress.’

It is pressure such as this that prompted suppliers to cut corners adding cheaper horse meat to the supply chain. The chicken industry seems to be set up differently, but with one major player leaving the flock, it is only a matter of time before something gives.

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CITY FOCUS: No hen party for suffering UK poultry firms as producers struggle to make ends meet